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Missed chance: Obama’s tax problem

President Obama faces huge, and probably insurmountable, obstacles to reviving a grand bargain — none higher and more difficult to overcome than his decision to increase taxes by $600 billion in December.

At the time, Obama claimed victory, slapping new taxes on the rich while protecting George W. Bush’s cuts for everyone else. In retrospect, it looks more like a missed opportunity than a political or policy triumph.

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Instead, it now seems likely that $600 billion in tax increases is all the new revenue Obama gets. That’s a far cry from the $1.6 trillion he wants, or even the $1 trillion-plus many Republicans were discussing in previous grand bargain talks.

Obama thought he would be able to stare down Republicans over the sequester, and get them to double the size of his tax increase to avoid heavy defense cuts. He was wrong. Once Republicans swallowed the $600 billion in hikes, they made plain they were done raising taxes for this Congress. And they really are done, Republicans say.

This is the biggest reason top Democrats and Republicans alike tell us talk of a grand bargain this time around is way overhyped — though, as our colleagues Jake Sherman and Carrie Budoff Brown wrote last week, Obama’s recent charm offensive shows he knows he now needs a sweeping deal more than ever.

“Nobody is even talking about a grand bargain,” one of the Senate’s most influential Democratic leadership aides told us. “It is not even on our radar right now.” An adviser to Speaker John Boehner told us that window was slammed shut by Obama’s hardball tactics since the tax hike. “He missed the chance.”

Another reason is the rancid relationship between Obama and Republicans on the Hill. House Majority Whip Kevin McCarthy (R-Calif.), the third-ranking House Republican, told us about an exchange he had with Obama at Saturday night’s white-tie Gridiron dinner. During a break in the program, McCarthy saw an empty chair next to Obama and decided to seize the chance. Surprised Obama wasn’t working the room, and thinking the president really is a loner, McCarthy walked up to the head table. He found the president was reading his BlackBerry. (Another attendee said Obama was talking to Ken Burns, the documentarian, who was showing POTUS pictures of his family on his phone.)

“I’m waiting for my dinner invitation,” the Republican joshed to Obama, referring to the president’s recent evening out with Republican senators. “I listen to Paul,” Obama replied, according to McCarthy, referring to House Budget Chairman Paul Ryan. Then, in what McCarthy took as a reference to a political charm offensive, he recalled Obama saying, “You guys give us too much credit. We’re not doing all that stuff you think we are.” As told by McCarthy, Obama then said that if Republicans are going to get entitlement reform, “You need me.” As McCarthy walked away, the congressman thought: “He’s still a law professor. He’d rather lecture you and put a red mark on your paper than talk to you.”